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ETF & Stock Winners of Longest US Economic Expansion

Sanghamitra Saha
Experiential stocks are likely to remain unscathed even if the current expansion ends.

U.S. economic expansion stepped into its 11th year on Jul 1, breezing past the previous record of 120 months from March 1991 to March 2001, according to the National Bureau of Economic Research.

However, the record-breaking expansion, which is now the longest in history, has also been one of the slowest as consumers are cautious about loosening their purse strings after suffering one of the worst recessions in the 2008-2009 period. Starting in June 2009, this record-setting run witnessed GDP growing cumulatively by 25%, far slower than previous expansions.

The Fed’s quantitative easing and rock-bottom interest rate policy along with the U.S. government’s Troubled Asset Relief Program (TARP) helped in reviving the domestic economy. Solid job growth, rising consumer confidence, upbeat GDP growth, wealth effect, cheap oil from mid-2014, Trump bump after Nov 2016, Trump tax cuts from the start of 2018, and relaxation in business regulations — collectively fueled the economy and the stock market in the past decade.

Inside the Economic Rise

The unemployment rate at the start of this winning economic cycle was 9.6%, while it was 3.6% in May 2019 – a 49-year low. Wage growth in the United States also picked up in recent times, resulting in greater affordability.

As per Reuters, the final GDP reading in June 2009 came up with a year-on-year contraction of 0.7%, after recording contraction of more than 5% for two successive quarters. In contrast, GDP grew 3.1% year over year in Q1 of 2019.

However, the momentum is cooling down. Job growth has been relatively weaker than in other postwar recoveries, per CNBC. There has lately been a lag in the housing market. The bond market has flashed recessionary signals several times in between. 

Not only this, the corporate earnings picture also looks bleak. The S&P 500 earnings are expected to decline 3% year over year despite 4.3% gains in revenues, per Zacks. Now 77% of the companies issuing pre-announcements hints that their profits will be worse than Wall Street estimates, which marks the second-worst quarter on record since 2006, as quoted on CNBC.

Against this backdrop, below we highlight some ETFs and stocks that weathered all ups and downs last decade and emerged as clear winners.

ETF Winners

First Trust Dow Jones Internet Index Fund FDN – Up 703.4%

The underlying Dow Jones Internet Composite Index includes only companies whose primary focus is Internet-related. The fund has a Zacks Rank #2 (Buy).

First Trust NYSE Arca Biotechnology Index Fund FBT – Up 606.9%

The underlying NYSE Arca Biotechnology Index is an equal dollar weighted index designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. The fund has a Zacks Rank #3.

iShares U.S. Aerospace & Defense ETF ITA – Up 510.6%

The underlying Dow Jones U.S. Select Aerospace & Defense Index measures the performance of the aerospace and defense sector of the U.S. equity market. The fund has a Zacks Rank #2 (read: Iran Downs U.S. Drone: Sector ETFs & Stocks to Gain).

Consumer Discretionary Select Sector SPDR Fund XLY – Up 521.5%

The underlying Index seeks to provide an effective representation of the consumer discretionary sector of the S&P 500 Index. The fund has a Zacks Rank #2.

Stock Winners

Domino's Pizza Inc. DPZ – Up 4040.0%

This Zacks Rank #2 company is the second-largest pizza restaurant chain in the world. It belongs to a top-ranked Zacks industry (top 37%).

Jazz Pharmaceuticals Plc JAZZ – Up 3817.9%

This Zacks Rank #2 specialty pharmaceutical company is focused on identifying, developing and commercializing innovative products to meet unmet medical needs in neurology and psychiatry. It comes from a top-ranked Zacks industry (top 28%).

lululemon athletica Inc. LULU – Up 2862.1%

This Zacks Rank #2 company designs and retails athletic clothing for women, men and female youth. Its apparel assortment, including items, such as fitness pants, shorts, tops and jackets, is designed for activities such as yoga, running and general fitness.

DexCom Inc. DXCM – Up 2594.5%

This Zacks Rank #1 company is developing continuous glucose monitoring systems for people with diabetes. It hails from a top-ranked Zacks industry (top 31%).